Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Tues 10.27.2009
Dollar Rises as Euro Fails to Surpass Technical Tipping Point The dollar rose the most against the euro in almost two months, reversing its drop to a 14-month low after the European currency failed to exceed a level above $1.50 that trading patterns indicated would have propelled it higher. The U.S. greenback rose against the South African rand and the New Zealand dollar on bets a drop in stocks discouraged investors from buying higher-yielding assets. South Korea’s won was the best performer versus the dollar among 10 emerging- market Asian currencies as the nation’s economy grew at the fastest pace in seven years. “At some point, the euro will fall victim to its own success,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “We’ve seen the euro touching new highs but really struggling to extend them significantly.”
Dollar Will Be Worthless Amid ‘Disaster’ in U.S., Faber Says The dollar will become worthless when people eventually realize the fiscal situation in the U.S. is a “disaster,” said Marc Faber, publisher of the Gloom, Boom & Doom report. “It will go to a value of zero eventually, but not right now,” Faber said today in an interview on Bloomberg Television. “Looking at Mr. Obama’s administration, it should already be there. I think it will take about 10 years until people realize that the fiscal situation of the U.S. is a complete disaster.”
Marc Faber, Dollar Will Eventually Go to Value of Zero, Oct 26, 2009
Are Stocks About To Be Killed In A Dollar Squeeze? Today the price action (mainly on the bid per NYSE tick) on the S&P500 & Nasdaq indicated a clear inverse correlation between the dollar and equities. Obviously the connection has always been part of the equation, what has not been as obvious is how many traders are watching this trade. As I posted earlier today on twitter, UUP showed large volume spikes today following the rumor of S&P downgrading the banking sector. If you look a bit further out you can see UUP has been in a downtrend finally finding some historical support down here around 22ish. As Roubini mentioned a dollar collapse is a lot less likely than a dollar rally. If this is the case profits from the rally we begin to be taken aggressively out of fear of, this will create great sell side pressure on equities and commodities alike. This timing is almost perfect, the rally has been way over extended, near 60%, we are exhibiting price action (tight ranges, easier to fall than to rise) in the index's which indicates a toppy environment. I am basing this off of most good news is being sold in relation to earnings, as NOT good enough.
Troubled Dollar could shed 60% more value The rapid breakdown of the dollar after putting in a series of new highs illustrates what lies in store for it in the years to come. However, in the interim some sort of relief rally is to be expected as the dollar has mounted a very hard correction in a relatively short period of time. A 2 year chart reveals that the dollar is very close to hitting a very strong support zone that falls in the 75.00-75.50 ranges. A test of this zone should lead to a bounce that has the potential of taking the dollar to the 80-82 ranges.
US-China currency war eclipses Davos, and threatens the world Turning a corner in the labyrinthine corridors of the Davos nerve-centre, I ran smack into Chinese premier Wen Jiabao – followed by a regiment of retainers and senior offices in full regalia. They have not quite adapted to the “sport” dress code of capitalism in Alpine retreat. Jeroen van der Weer – a Davos stalwart – wears horrendous corduroy trousers (pink sometimes) with a 1950s-era Tyrolean woolly. I dread to think how they react to Swiss prices if they venture into the restaurants. Mr Jiabao smiled at me benignly, but he is not in a good mood. Indeed, he is fuming over the remarks by US Treasury Secretary Tim Geithner that China was “manipulating” its currency to gain market share. Reports were circulating this afternoon in Davos that Mr Jiabao erupted into a tirade after lunch at the mere mention of Mr Geithner’s name.
Dollar wobbles after Chinese comments The dollar dropped to a fresh 14-month low against the euro in intraday trade yesterday after the People's Bank of China suggested that, while the dollar should remain dominant, the share of the euro and the yen should increase in its foreign exchange reserves. The exact composition of China's $2,270bn foreign exchange stockpile, the world's largest, is a state secret, but it is estimated that it is held 60 per cent in dollars, 30 per cent in euros and the remainder in sterling and yen. Fears that China would diversify its reserves away from a weakening dollar have been a drag on the US currency in recent months, amid repeated concerns from Chinese authorities over the value of its stockpiles. The dollar fell to a low of $1.5061 against the euro, its weakest level since August 2008, on the news. But the dollar pared its losses against the single currency, after the author of the report, which appeared in the Financial News, a paper published by the PBC, said it was purely a "personal view".
China faces 'economic slowdown' in 2010 China may face an economic slowdown next year, Stephen Roach, the chairman of Morgan Stanley Asia, has warned. A massive government stimulus package and more than $1 trillion of new bank lending helped the Chinese economy jump 8.9pc in the third quarter. However, Mr Roach warned that China still faces "tough challenges in the years ahead". Speaking in Shanghai over the weekend, Mr Roach said: "China's growth model is much more about supply than demand. It's not a sustainable model for China. It's not a sustainable model for any nation."
George Soros on the Global Economy, China and Regulation Chrystia Freeland, U.S. managing editor of the Financial Times, interviewed George Soros, the legendary fund manager, about the state of the world economy, relations between the U.S. and China, his investment performance and regulating bankers’ compensation. A link to the transcript of the interview follows at the end of the post.
China Needs ‘Unexpected’ Yuan Jump to Limit Inflows China should allow an immediate one- off jump in the yuan’s value and widen the currency’s trading band to stem inflows of speculative capital that may fuel inflation, said UBS AG economist Wang Tao. “China’s economic fundamentals mean that the yuan should strengthen,” the Beijing-based Wang said in a phone interview yesterday. “The central bank will find it harder to manage liquidity and inflation when a flood of speculative funds returns, betting on the yuan’s appreciation.”
Platinum demand soars in China In China platinum is taking big strides with the demand for the metal rising even in remote areas. Higher sales are being fueled by holiday-related jewellery sales and for bridal rings, which were helped by 2009 being considered an auspicious year for getting married and an increasing desire for platinum. Platinum jewellery sales in China increased by more than 400,000 ounces, compared to the same period in 2008, largely in response to lower platinum prices, but also given the reduced premium over gold.
Here's Why Asia Must Eventually Ditch the Dollar Talk is cheap, and all ASEAN’s leaders did last weekend was to talk about an Asian currency zone and free trade agreement by 2015. News reports exaggerate the near-term ability to maneuver of the major players, for example, this rather overwrought report in the Times of India Oct. 23: BEIJING: China is set to use the ASEAN meet to sell the idea of making the Yuan an international currency. It is using the sense of uncertainty about the US dollar to sell a new dream of enlarged regional trade, financial support from Beijing and reduced dependence on the volatile dollar.
'US taking laissez faire approach to dollar' With all the 'strong dollar' rhetoric coming from the Fed and broken-record Bernanke, it's a wonder any investors are making money. But one we know and trust is. . .because he's not listening. "The U.S. will continue to take a laissez faire approach to the dollar," says John Doody, Economics Professor for nearly two decades and current author and publisher of Gold Stock Analyst. In this exclusive interview with The Gold Report, John explains how he measures gold's price performance, why he believes most investors don't have enough gold stocks in their portfolios and which companies he's making money on right now.
Niall Ferguson: U.S. Empire in Decline, on Collision Course with China The U.S. is an empire in decline, according to Niall Ferguson, Harvard professor and author of The Ascent of Money. "People have predicted the end of America in the past and been wrong," Ferguson concedes. "But let's face it: If you're trying to borrow $9 trillion to save your financial system...and already half your public debt held by foreigners, it's not really the conduct of rising empires, is it?"
DOLLAR ALERT - REVENGE of the GREENBACK... The dollar is at a crossroads and there are two probable scenarios. One is a final plunge following the recent grinding decline to an intermediate low that is followed by an intermediate reversal. The other is that it suddenly breaks out upside from the severe downtrend it has been stuck in since early March and rallies strongly, strongly because it is likely to be juiced by a sudden wave of panic short-covering.
Please Mr Geithner Don't Pass the Buck on the Dollar It seems nobody in this country wants to take responsibility for the secular decline in the value of the U.S. dollar. When Fed Chairman Ben Bernanke is asked about the currency's decline, he refers the query to the Treasury Department. When the president is asked about the dollar, he often gives the tired old platitude that the U.S. has a strong dollar policy, but his vacuous words seem more like perfunctory utterances than a bona fide dollar-boosting strategy.
Dollar firms as concerns over stocks, banks mount The dollar turned higher on Monday, fed by safe-haven demand as analysts cited pressure on U.S. stocks nearing technical resistance levels, while concerns over the health of financial firms returned. "The dollar is now rallying across the board," said Ashraf Laidi, chief market strategist at CMC Markets. "The parameters of risk appetite were drawn by $82 oil and by 1,100 on the S&P 500," he said. Rising concerns that stocks might be overstretched were fed by worries over the financial sector of the market, following the downgrades of several big U.S. banks, Laidi said. . . . . . . . a Chinese central bank researcher called for moving some of the country's massive foreign reserves into euro and yen holdings.
America's Weak Dollar Policy: "You Can Envision All Sorts of Crises" . . . . With the U.S. Treasury set to auction a record $123 billion of notes this week and the Fed's $300 billion Treasury purchase program set to expire, those risks should not be taken lightly. Of course, such concerns have been circulating for a while and have not come to fruition, to date. It's "very difficult to say" when foreigners stop talking about diversifying away from the dollar and take more concerted action, Tilman admits. But "it's hard to imagine a lot of foreign buyers are going to tolerate further declines in the dollar. "
Dollar Advances as Bank Losses, Stock Drop Spur Safety Demand The dollar gained for a third day against the euro and reached a one-month high versus the yen on concern U.S. bank losses will derail the global economic recovery, sapping demand for higher-yielding assets. The dollar traded near the highest in almost one month against the yen on speculation U.S. lawmakers will phase out a tax credit for homebuyers and Bank of America Corp. will have to sell shares to pay back its government bailout. Australia’s dollar traded near the lowest in a week before a report tomorrow that may show consumer price gains slowed, reducing pressure on the central bank to raise interest rates.
Conditions are Ripe for Dollar Rally The strong recovery in the U.S. Dollar late in the week and the inability to break it sharply lower could be a sign that a short-covering rally is imminent. Rumors that the Fed may begin to raise interest rates earlier than expected, a poor U.K. economy and fear of intervention all helped boost the Dollar on Friday. The uptrend continued on the daily USD JPY chart as rumors swirled that traders are betting the Fed will raise interest rates sooner than expected. Traders who sold Dollars and bought Yen when U.S. interest rates became the lowest in the world are not being forced to buy back their positions. This is helping to boost the USD JPY. There will come a point when the Yen once again becomes the world's carry trade. The Dollar should rally substantially and equities should break hard when this occurs.
Dollar Not in a Disorderly Drop, Pimco’s Clarida Says The dollar is not experiencing a “disorderly” decline and will likely remain the world’s main reserve currency for a number of years, according to Richard Clarida of Pacific Investment Management Co. “My bet is that we don’t see a disorderly decline,” Clarida, a global strategic adviser to Pimco, said in a Bloomberg Television interview in New York.
Peter Schiff issues a Red Alert: "Get out of the US dollar"
Anything Less Than Full Disclosure is Unacceptable By: Dr. Ron Paul Last week a new bill was introduced in the Senate to audit the Federal Reserve. Some backers of my bill HR1207 and the existing Senate companion bill S.604 were a little miffed at this, but depending on how you think about it, this new legislation poses no great threat to our efforts. With the economy in shambles, people are looking for answers - not just because of lost savings on Wall Street, but because of lost houses on Main Street. Because of the many problems we face, the Federal Reserve and its powers over the economy have come under scrutiny. This translates into a lot of political pressure on Congress. With all the House Republicans signed on as co-sponsors and over half of the Democrats, HR 1207 has enormous bipartisan support. It would be disingenuous for Washington not to embrace the principles behind this bill after all the promises for transparency. How can one credibly argue for more transparency in government in one breath and defend the secrecy of the Federal Reserve in the next?
$2,000. Gold Zero Discount Value of Gold in the Total Banking System The U.S. banking system has many banks with large amounts of bad loans on their books. How do these bad loans affect the value of the dollar and gold? Specifically, how do they affect the Zero Discount Value (ZDV) of gold? . . . . . . . . To estimate the ZDV in this simple situation, in which no other assets than gold qualify as valuable assets, divide the monetary base by the number of ounces (oz) of gold that the bank holds. If, for example, 200 oz. of gold are held against 400,000 dollars of monetary base, then the ZDV is $400,000/200 oz. = $2,000 an oz. Only if gold is valued at $2,000 an oz. does every dollar that has been issued by the central bank correspond to one dollar’s worth of gold.
Gold: How the Mainstream Gets It So Wrong It turns out that public perception and mainstream TV commentators have had things entirely wrong. Data shows that gold has been outperforming equities for the last 40 years. Gold today is at $1,050. That’s 30X times the gold price of $35 in 1971, when the United States went off the gold standard. That represents a 3,000% gain. The Dow Jones Industrial Average (DJIA) in 1971 traded around 900. It’s now 10,000. That’s a gain of about 10X, or 1,000%, over the same period of time. Gold has outperformed the DJIA by a factor of 3 since coming off the gold standard.
'Gold price should be at least $3000 per ounce' When you get right down to it, no matter what techniques one might rely on for his investment decisions there is one thing that they all have in common. In order to be successful an investor has to be on the right side of the longer term trends. We are all bombarded with daily charts and sometimes weekly, but looking at the long term monthly charts can reveal areas where price on the long term has historically shown to be important turning or continuation points. Not only do they give you a perspective or where price has been in the past, it gives you an idea of where price is now in relation to where major peaks and bottoms occurred.
Boiling Point I remember well when gold rose from the measly price of $400 to above $700, the excitement was contagious. Then it rose from $700 to $1000 and the excitement was marginal. Now as we are at the beginning of the next major up-leg the excitement is moribund. The only excitement is from select institutional investors and central bankers, but even they are a rare breed and certainly not listened to by the masses, but they will. There are three obvious stages to a bull market, smart money accumulation being the first. That stage is just winding down now. We are only at the beginning of the second stage where gold climbs the so called wall of worry as institutions and funds accumulate before telling their clients to get into the market.
Gold Calls the World Bankers’ Bluffs In Friday’s essay we discussed the frightening chart of the US dollar index. In particular we focused on the manner in which the Dollar has broken critical support (76) and is on its way to its all time low of 72. Below that… and we’re in uncharted territory. Long-time readers know that I’m no fan of Ben Bernanke. But Bailout Ben is in no way unique in his thinking (though he has managed to spend more money than WWI, WWII, and the New Deal combined). Indeed, virtually every central bank in the world has engaged in a massive printing orgy. Australia, Canada, China, Germany, Korea, Russia, even South Africa and Turkey have all engaged in Stimulus plans in one form or another.
Gold in the Early Stages of Breaking Out in Multiple Currencies October 2009 has developed into a truly glorious month. For the first time in history the average monthly price for US$Gold will exceed $1,000. Certainly all are celebrating such a wonderful event. Perhaps the most important aspect of this remarkable event is that the purveyors of price suppression and manipulation theories can now turn off the lights in their caves. Reality has crushed their misconceptions. If an $800 bull market is price suppression, give me some more!
Hold That Gold! Eric Hommelberg argues that gold has significantly outperformed the Dow in terms of valuations, and as he sees it, the bull run will last at least until the middle of the next decade. The rhythm of this market over the past eight years tells him that $1,000 gold is history, and we can expect the current climb to push the price past the $1,250 mark next spring. . . . . . . . . Again, investors were waiting for a trigger. When the news came out that the Gulf Arabs - along with China, Russia, Japan and France - plan to end dollar dealings for oil, all heck broke loose. The news made it very clear that a new basket of currencies will most likely include gold - as well as the yen, the yuan and the euro. Sure enough, it was very dollar-bearish - and therefore very gold-bullish news. This prompted, of course, a buying spree for gold, which overwhelmed the short players in the short term.
Gold Says Stimulus "Making a Mess" as Private Investors Forecast Higher Prices, Lose Confidence in Fiat Money THE PRICE OF GOLD gave back early gains in London on Monday, dipping below last week's all-time record finish versus the Dollar as European stock markets also gave back an early 1% rise. Asian trading was light, with Hong Kong closed for a holiday. Oil drifted lower to $80 per barrel, while the major currencies – and government bonds – were little changed. This week the US Treasury will issue a record $123 billion in new debt.
"If gold is telling us anything today," writes Fidelity International analyst Tom Stevenson in London's Daily Telegraph, "it is that governments – principally America's and [the UK] – are about to make a mess of the exit from their economic stimulus programs."
Gold Falls as Dollar’s Rebound Erodes Demand for Alternative Gold fell the most in more than a week after the dollar rebounded, eroding the appeal of the precious metal as an alternative asset. Silver posted the biggest decline in a month. The greenback rose as much as 0.8 percent against a basket of six major currencies after dropping as much as 0.4 percent earlier. Gold, which typically moves inversely to the U.S. currency, climbed to a record $1,072 an ounce on Oct. 14. “It’s all predicated on the dollar,” said Marty McNeill, a trader at R.F. Lafferty Inc. in New York. “If the dollar rallies, gold can see some downside.”
The War on the U.S. Dollar Last week, I showed you the most shocking numbers I’ve seen in my lifetime: Up until the day Lehman Brothers collapsed in September of last year, it took the Fed 5,012 days — 13 years and 8 months — to double the cash currency and reserves in the coffers of U.S. banks. In contrast, after the Lehman Brothers collapse, it took Bernanke’s Fed only 112 days to double the size of those reserves. He accelerated the pace of bank reserve expansion by a factor of 45 to 1. . . . . . . . The dollar is careening toward its lowest level in history! Gold is going through the roof right now, plowing past every barrier, surging to its highest level of all time. Major oil producers all over the world are talking about abandoning the dollar as the basis for global oil contracts, right now!
Green Monster I’m a fan of economics and of history, as well as politics, a combination that forms some very interesting cycles to research, discuss and argue on. None is so interesting than the death of great nations, for here there is always the self destruction that comes before the final breakups and invasions. As they say: Rome did not fall to the barbarians, all they did was kick in the rotting gates. It can be safely said, that the last time a great nation destroyed itself through its own hubris and economic folly was the early Soviet Union (though in the end the late Soviet Union still died by the economic hand). Now we get the opportunity to watch the Americans do the exact same thing to themselves. The most amazing thing of course, is that they are just repeating the failed mistakes of the past. One would expect their fellow travelers in suicide, the British, to have spoken up by now, but unfortunately for the British, their education system is now even more of a joke than that of the Americans.
The War Over the U.S. Dollar Versus Gold A fierce war of words has erupted in recent weeks between the two major camps in monetary circles. The first camp – the gold bulls/dollar bears – have been loudly voicing their twin belief that the gold price is poised to skyrocket while the dollar price is perched for a collapse. The other side – the gold bears/dollar bulls – are making the counter claim the gold price is setting up for a crash. . . . . . . . Before we examine the claim of the “coming gold crash,” let’s examine the dollar crash scenario. Is it possible that the “powers that be” would allow the mighty greenback to cascade to new depths, eroding purchasing power for millions of Americans in the process? After all, no government has ever outlived its currency. Why would the federal government allow the dollar’s value to be sabotaged at the expense of its own survival? The possibility of an outright dollar implosion must therefore be seen as a slender one.
"Obama Demands Pay in Euros!" The "dollar debate" on the Internet has been ferocious and emotionally-charged, but sadly lacking in logic. To oppose the "dollar will crash" theorists is like arguing a woman's right to choose with the fist-waving throng assembled outside an abortion clinic. The results are equally disappointing. To say that "minds are already made up and the issue is settled", is an understatement. For many, the dollar's transition from the world's reserve currency to a Wiemar era Deutschemark is not a question "if" but only of "when". . . . . . . .
Here's a likely scenario of what could take place in the next few months:
Even though the signs of severe deflation are visible everywhere, investors short the greenback and the dollar plunges to $1.60 per euro. That increases public angst which sets off a firestorm on Capital Hill. The Congress forces the Fed to stop its quantitative easing (QE) program (which has already pumped over $1 trillion into US Treasuries and mortgage-backed securities) and long-term interest rates spike overnight. This puts downward pressure on the housing market and the slump deepens. More jobs are lost, more banks and financial institutions default, perfectly good businesses cannot role over their debt and call it quits, prices fall across the board, the stock market retraces its March lows, and the economy ends up in the ditch.
Calling a Market Top – Feldstein for Fed Chair Stock market trend: Inflection Point – Likely Trend Reversal It ain’t over til it’s over, but as a speculating man, I’ve been betting that we’ve reached a market top in the U.S. and that that top may well be signaling the onset of a double dip U.S. recession in one to two quarters. Loyal readers will know that I took most of my profits off the table some weeks ago and went to a cash and hedged strategy. In this next phase, I will hold my long positions in my cycle-resistant biotechs but I am moving cautiously and in small steps towards a net short position on the broad U.S. market to try to capture some of what I believe will be a downward move (TWM is my favorite shorting tool for the broad market).
America on a "Shaky Bridge Over a Volcano" With a meaningful economic recovery facing an uphill battle, Tilman says it may require another bubble before serious financial reform takes hold. "I'm thinking about the current environment. Unfortunately it's this shaky bridge over a volcano," he says. Meanwhile, Tilman points to three big themes:
The timing of the next bubble will depend on the U.S. economy and the dollar.
Economic signs point to extreme caution by mid-2010.
Ultimately, we still need the right kind of transparency among financial institutions for true financial reform.
Russia to sell two-thirds of its gold holdings Dollar weakness was manifest once gain as the new trading week got underway, with the US currency recording a fresh 14-month low against the euro overnight. The greenback also slipped on the trade-weighted index, losing 0.13 to 75.31 at last check. This morning's macroeconomic news reveals a mixed bag of confidence, one that is dependent on geography. German consumer sentiment slipped for the first time in more than a year, as locals worry about continuing job losses. Over in the UK, in the midst of a rather nasty economic picture, business confidence levels rose to an 18-month high based on the latest survey.
Not Inflation Or Deflation – But Speculation Call it what you want, the primary condition our condition is in is not inflation, or deflation, or even stagflation for that matter, although it’s much closer than the other two definitions in describing the macro. Why would the term stagflation better describe macro-conditions? Answer: Because the mature state of globalization that guarantees us a constant state of overproduction moving forward, which depresses prices, is being countered by monetary inflation, which has increased certain prices, but primarily only those under government influence, leaving the rest of the economy sluggish. And it gets worse when one realizes our fiat currency monetary system is also mature from this perspective as well, with gambling now the backbone of non-government activities within aged economies (US, Europe, etc.), which cannot go on indefinitely.
Corn, Soybeans Climb as Dollar Rally Halts, Increasing Demand Corn rallied, rebounding from the largest decline since June, and soybeans rose as a weakening dollar boosted the demand outlook for supplies from the U.S., the world’s biggest producer of the crops. Corn gained as much as 0.7 percent as the Dollar Index declined for the first day in four against six major currencies, increasing demand for commodities as an alternative investment. The grain lost 5 percent yesterday in Chicago trading, the steepest drop since June 30.
Oil Trades Below $79 as Dollar Gain Cuts Demand for Commodities Crude oil traded below $79 a barrel after falling the most in a month as the dollar rose, reducing investor demand for commodities to hedge against inflation. Oil also fell as a surge to a one-year high of $82 a barrel last week increased prices at a faster pace than a recovery in demand. OPEC may boost production targets at its meeting in December as prices climbed above $75, the group’s president said. “The rally will not sustain, eventually oil should go back down towards $70,” said Clarence Chu, a trader with options dealers Hudson Capital Energy in Singapore. “Demand hasn’t really come back.”
Asian Nations Aim to Succeed Where Bernanke Failed on Bubbles Policy makers from South Korea to Singapore, confronted with rising real-estate values that threaten to mimic in Asia the U.S. mortgage bubble that roiled the global economy, are stepping up efforts to rein in prices. Regulators in South Korea, Hong Kong and Singapore told banks in recent weeks they need to tighten lending standards. Central banks including India’s and South Korea’s have signaled a readiness to raise interest rates in the coming months.
Clock ticking on debt ceiling US is about to reach its credit limit This week Uncle Sam plans to sell $123 billion worth of Treasurys. That will bring the country's debt level very close to the $12.1 trillion debt ceiling. Roughly $211 billion separates what the country owes and its self-imposed credit limit. And by Friday, after another week of massive debt sales by the Treasury Department, that gap will likely have narrowed considerably. It is now expected that the $12.104 trillion debt ceiling could be breached by the end of November. It is also expected that lawmakers will raise the ceiling, as they have done more than 90 times since 1940 -- eight of them since 2002.
Back-Door Taxes Hit U.S. With Financing in the Dark Salvatore Calvanese, the treasurer of Springfield, Massachusetts, for four years, had a ready defense for why he risked $14 million of taxpayer money on collateralized-debt obligations laden with subprime mortgages in 2007. He didn’t know what he was buying, he says, and trusted the financial professionals who sold them and told him they were safe. “I thought they were money markets that were just paying more,” Calvanese said in an interview. “Nobody ever used the term ‘CDO,’ and I am not sure I would have known what that was anyway.”
Wall Street firms should not be called banks, US official says Head of government insurer says legal constraints on using the word 'bank' needed to dispel confusion One of America's top financial regulators has suggested that Wall Street institutions should be banned from calling themselves "banks" in an effort to clear a fog of confusion about the word in both political and consumer circles. Sheila Bair, chair of the Federal Deposit Insurance Corporation (FDIC), suggested that only commercial deposit-taking institutions, where customers' cash is safeguarded by a guarantee, should be permitted to describe themselves as banks.
Central Banks Hitting Assets Question Greenspan View Central bankers from Washington to Oslo are taking greater account of accelerating asset prices to avoid the policy mistakes that inflated two speculative bubbles in a decade and led to the worst financial crisis since the Great Depression. A month after warning that property prices are rising “probably excessively,” Norges Bank Governor Svein Gjedrem is set to increase interest rates on Oct. 28. Reserve Bank of Australia Governor Glenn Stevens cited costlier real estate as a reason for raising rates three weeks ago.
Geithner Widens Bills-to-Bonds Gap With New Sales Treasury Secretary Timothy Geithner’s plans to lock in near record-low borrowing costs in 2010 may mean a second year of losses on longer-term bonds. After selling $1.9 trillion of short-term securities to finance President Barack Obama’s efforts to end the worst recession since the 1930s, the Treasury plans to lengthen the average due date of its outstanding debt to 72 months from a 26- year low of 49 months. That may mean boosting sales of 10- and 30-year bonds by 40 percent over the next year to $600 billion, according to FTN Financial in Memphis, Tennessee, driving down prices of longer-term securities.
No relief in sight for Main Street banks With loan losses still mounting, some regional banks aren't looking to return to profitability until 2011. JPMorgan Chase, Goldman Sachs and other Wall Street megabanks may be showing signs of recovery lately, but things are hardly looking up for regional banks. From the Rust Belt to the Deep South, big commercial lenders with more routine banking businesses have endured some of their worst losses since the financial crisis began more than a year ago.
Treasury near deal on 'too big to fail' The Treasury Department and a senior House Democrat have decided against making financial firms pay up front the costs of dismantling them if regulators decide they have grown "too big to fail," according to a House aide familiar with the plan. Instead, those companies would be allowed to borrow money from the government. The government would then recoup the costs by either seizing the firm's profits or seeking restitution from the entire industry, the aide said. The aide spoke on condition of anonymity because details had not been released. Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, was expected to announce the agreement by Tuesday.
Abolishing Risk Destroys America and Your Wealth Our willingness to engage in risks drives our prosperity. We urgently need a public debate on risk, one driven by reason, not emotion. Without risk, individuals are bound to lose the purchasing power of their savings; corporations that don’t take risk will fade into oblivion; and governments that regulate away risks destroy the growth engine of their nation.
Got Perfect Credit? You Could Be Charged For It! Bank Of America, Citigroup First To Try Out Idea, Which Will Undoubtedly Alienate Many Who Follow The Rules Loraine Mullen-Kress carries a Bank of America credit card and religiously pays off her balance. "Flawless credit," she boasted. Yet now, her good credit habits could cost her. Earlier this month Bank of America started notifying customers like Mullen-Kress that they will be charged a new annual fee of $29 to $99. "There is a big segment of their population that they will have never made money on, which is people who pay their bills on time every month," said Ben Woolsey, Director of Consumer Research at CreditCards.com.
Madoff Secrets Go to the Grave Jeffry Picower, found dead at the bottom of his swimming pool yesterday, was Suspect Number One in terms of what happened to Madoff’s billions. Now, Allan Dodds Frank asks, will they ever find the money? Before he was found in his swimming trunks, dead at the bottom of the pool at Casa Del Sud, his $33 million oceanfront mansion in Palm Beach, Jeffry Picower held the keys to Bernard Madoff’s vault.
Seven battles that will decide the future of the presidency Obama has set a deadline of next month to have a bill on the Oval Office desk to extend health insurance to the 46 million Americans who have no cover. It is possible, though unlikely, that he will get no bill at all, but more likely, and almost as controversial, is that he will end up with a bill that has been so watered down it will disappoint reformers. Having lost ground to the Republicans over the summer, and seen support for healthcare slip in the polls, he will tonight in a rare address to Congress try to wrest back the initiative.
After the Billionaires Plundered Alabama Town, Troops Were Called in ... Illegally One of this year's more disturbing stories that were ignored was the illegal Army occupation of Samson, Alab., in March following a shooting spree that raged across two towns by a disgruntled worker, leaving 11 people dead. As I wrote at the time, Michael McLendon, 27, went on a killing rampage following years of relentless corporate exploitation and harassment against him, his mother (whom he mercy-killed), and the entire rural Alabama region, which suffered like so many parts of rural America at the hands of billionaire goons like chicken oligarch Bo Pilgrim of Pilgrim's Pride notoriety. One of the creepiest details to emerge in the shooting rampage were reports that troops from nearby Fort Rucker were brought into Samson and other surrounding areas to patrol the streets. This is a clear violation of the Posse Comitatus Act, every freedom-loving American's worst nightmare.
Fed Change To Home Appraisal Rules Has Been A Disaster It makes sense that the government wants to prevent home prices from becoming over-inflated again, but tut instead of helping out the now distressed housing market, recent changes to the way homes are appraised has actually lowered the value of existing prices: Detroit News: At issue is the Home Valuation Code of Conduct for mortgages securitized or held by Fannie Mae or Freddie Mac, which deal with about 70 percent of U.S. mortgages.
Fed appraisal rules sink home values New regulations kill home sales, industry groups say Federal actions intended to stabilize inflated real estate prices that led to last year's financial meltdown are instead depressing prices and killing some sales in an already weak market. At issue is the Home Valuation Code of Conduct for mortgages securitized or held by Fannie Mae or Freddie Mac, which deal with about 70 percent of U.S. mortgages. The new rules, which took effect May 1, were intended to prevent cozy relationships between appraisers, agents and brokers that could lead to bias, fraud and inflated home values.
Are You Middle Class? Maybe Not For Long Many people write of the imminent destruction of the U.S. middle class (of which I consider myself a member) but few have explained specifically how this occurs. Understanding the mechanism seems important if I hope to avoid the fate of most of my peers. An insight on this question came from an unexpected quarter. A gentleman by the name of Fernando Aguirre, who posts on Internet forums and his blog as FerFAL, has written voluminously about his experiences as an Argentine citizen during and after the economic cataclysm that wracked his country in 2001. I first found a long forum post, and then a Google search of "FerFAL" revealed a larger web presence, including a recently published book.
Stuy Town Ruling Already Screwing Other Commercial Landlords Last week's ruling against the owners of New York City mega-plex Stuyvesant Town, which noted that the landlords improperly raised rates, is already being used as a precedent against others. NY DailyNews (via SquareFeet): Residents of 1600 Sedgwick Ave. in Morris Heights allege that landlord Riverview Redevelopment illegally jacked up rents to market rates on 80 apartments after taking them out of a federal affordable housing program last February.
Nelson Says Senate to Extend, Reduce Homebuyer Credit Senate leaders are negotiating to extend and gradually reduce an $8,000 tax credit for first-time homebuyers through 2010, Senator Bill Nelson of Florida said. “We should be able to extend that later this week,” Nelson, a Democrat, told reporters traveling today with President Barack Obama on Air Force One to a speech in Jacksonville, Florida.
The Case-Shiller Will Show Housing Is Falling Again The last few Case-Shiller reports have shown sequentially increasing home prices, but this could come to an end when the new numbers come out tomorrow. (Or, more likely, next month, when the September numbers are finally reported).
From our October 2009 Real-time Housing Report, The Altos Research 10-City Composite Index was down by 0.5% in September and 1.1% during the third quarter.
Using the housing market ask prices and more specifically, looking at the ask prices of new sellers entering the market each week, it’s clear that new sellers are viewing the market more pessimistically than sellers entering the market during the Spring. This would make sense because of the clear seasonality in the national housing market.
Jobless rates stubborn Economists warn of low employment in near future Even with an economic revival, many U.S. jobs lost during the recession may be gone forever, and a weak employment market could linger for years. That could add up to a "new normal" of higher joblessness and lower standards of living for many Americans, some economists are suggesting. The words "it's different this time" are always suspect. But economists and policymakers say the job-creating dynamics of previous recoveries can't be counted on now.
60 Minutes [ October 25 ] The $60 Billion Fraud PART 1
60 Minutes [ 10/25 ] The $60 Billion Fraud PART 2
Health care: How the U.S. system is designed to waste your money On Monday, Thomson Reuters released "Where Can $700 Billion in Waste Be Cut Annually from the U.S. Healthcare System," a white paper exploring American health-care costs. The report identified six factors -- administrative inefficiency, provider inefficiency, lack of care coordination, unwarranted use, preventable conditions, and fraud -- that cost the U.S. health-care system roughly $700 billion a year. That's a shocking figure, but $700 billion is a conservative estimate. The price of waste may be as much as $850 billion annually, the report concluded, and other studies suggest the figure may be closer to $1.2 trillion. Given that the most expensive health-care proposal on the table in Congress would cost about $1 trillion, it's clear that significant industry reform could fund most of the cost of universal health insurance.
US health bill will include public option Compromise allows states to opt out Harry Reid, the US Democratic Senate leader, on Monday signalled the tide may have turned in favour of a more liberal version of healthcare reform when he said the impending Senate bill would include a government insurance plan, or “public option”. Mr Reid’s announcement, which follows two weeks of intense consultation with the 60-strong Democratic caucus in the Senate, marks a sharp turnround from a few weeks ago when the US healthcare debate was dominated by conservatives opposed to virtually any kind of reform.
Prices still aren't right for consumers The government's key inflation measure has shown lower consumer prices most of this year, but there are a lot of reasons why it doesn't feel that way. The government says consumers are paying less for their everyday needs compared to a year ago. But if it feels like your dollar is not going as far as it used to, you're not alone. The Consumer Price Index is down 1.3% from a year ago, meaning that the typical market basket of goods and services should be costing you that much less. But there are a number of factors, some having to do with how CPI is calculated by the Labor Department's Bureau of Labor Statistics (BLS) and some having to do with economic behavior, which can make those savings seem like a mirage.
American Preeminence Is Disappearing Fifteen Years Early You may not be prepared for time-travel, but welcome to 2025 anyway! Your rooms may be a little small, your ability to demand better accommodations may have gone out the window, and the amenities may not be to your taste, but get used to it. It's going to be your reality from now on. Okay, now for the serious version of the above: In November 2008, the National Intelligence Council (NIC), an affiliate of the Central Intelligence Agency, issued the latest in a series of futuristic publications intended to guide the incoming Obama administration. Peering into its analytic crystal ball in a report entitled Global Trends 2025, it predicted that America's global preeminence would gradually disappear over the next 15 years -- in conjunction with the rise of new global powerhouses, especially China and India. The report examined many facets of the future strategic environment, but its most startling, and news-making, finding concerned the projected long-term erosion of American dominance and the emergence of new global competitors. "Although the United States is likely to remain the single most powerful actor [in 2025]," it stated definitively, the country's "relative strength -- even in the military realm -- will decline and U.S. leverage will become more constrained."
***** Consider this *****
For the 2010 Census: Name and Address Only (Congress Will Obey the Constitution When the People Demand It) Next year the country will go through another census. The people and the states – the creators and on-going sustainers of the federal government – have authorized this undertaking (U.S. Constitution, Article I, section 2). The census should be seen not as a burden but rather as an opportunity for Americans to practice self-government. Let me explain. Our written Constitution embodies ideas to which every member of Congress has taken an Article VI oath to support. In taking their constitutional oath the members of Congress are joined by every member of the 50 state legislatures, every federal executive, legislative, judicial officer, and every executive, legislative, judicial officer of the 50 states, as well as all military personnel. That so many are required to take the oath "to support this Constitution" is ample evidence that the Framers thought their written document to be quite important, a belief shared by most Americans. Our Constitution is written in clear, understandable English. Consider the census provision. "The [first] actual Enumeration shall be made within three Years after the first Meeting of the Congress of the United States [March, 1789], and within every subsequent Term of ten Years, in such Manner as they [Congress] shall by Law direct." This allows Congress to count us, but only count us. The operative word, "Enumeration."
US Senate opens debate on climate change The Senate’s environment and public works committee will on Tuesday start hearings on a climate change bill, although it is unlikely that any legislation could be enacted before the Copenhagen summit in December. The draft bill, put forward by Barbara Boxer of California, chair of the committee, and John Kerry of Massachusetts, who heads the Senate foreign relations committee, aims to cut US emissions by 20 per cent by 2020.
New Climate Change Agreement Is Unlikely to Be Achieved Deutsche Bank AG analysts said, global plans to slow climate change will probably fail through 2020. Nations will require further limits equivalent to total yearly emissions in the U.S. Analysis of 270 climate policies indicate they won’t keep emissions from rising in 2020 to levels that exceed what is needed to keep temperatures from advancing 2 degrees Celsius (3.6 Fahrenheit), according to analysts including Mark Fulton, global head of climate change investment research at Deutsche Bank’s asset-management division.
Americans Pull Strings in Afghan Election Henry Kissinger once observed that being America's ally can be more dangerous than being its enemy. Take poor Hamid Karzai, the amiable former business consultant and CIA "asset" installed by Washington as Afghanistan's president. As the U.S. increasingly gets its backside kicked in Afghanistan, it has blamed the powerless Karzai for its woes and bumbling. You can almost hear Washington rebuking, "Bad puppet! Bad puppet!" The U.S. Congressional Research service just revealed it costs a staggering $1.3 million per annum to keep an American soldier in Afghanistan. Costs for Canadian troops are likely similar. This huge expense can't go on forever.
Are You Ready for the Next Crisis? One conclusive hallmark of a failed state is that the crooks are inside the government, using government to protect and to advance their private interests.
On the Edge with Max Keiser - 23 October 2009 (1/4)
On the Edge with Max Keiser - 23 October 2009 (2/4)
On the Edge with . . . Paul Craig Roberts (3/4)
On the Edge with . . . Paul Craig Roberts & The New Welfare Queens (4/4)
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